Incapacitated investor mandate

Some investors lose the physical ability to sign, but keep their mind fully able to make decisions. A stroke, an accident, or an illness can do this.

For exactly this situation, SEBI allows a special mandate. An investor holding a single account can empower one of his nominees to operate the account. This is not a transfer of ownership. It is a stand-in arrangement, for someone who can still think and decide, but cannot physically sign.

The investor decides how much of the account this nominee may touch, and can change that decision at any time.

The investor may empower 1 nominee, excluding a minor nominee, to operate the account if physically incapacitated but still having the capacity to contract. The investor also specifies either a percentage or an absolute value of the assets that this nominee may encash, and may change this mandate any number of times without restriction.

On receiving such a request, the Participant must send a responsible officer to visit the investor in person. The nominee's request must be accompanied by a medical certificate stating the reason for the inability to sign and its expected duration. The officer must first satisfy himself that the investor genuinely has the capacity to contract — the workbook is explicit that this excludes an investor who is on a ventilator, in a coma, or unconscious. Depending on the degree of incapacity, the officer obtains a thumb impression, toe impression, or a mark, in the presence of an independent witness, and records his own name, signature and a remark such as "thumb impression/toe impression/mark affixed in my presence" on the request.

Two further safeguards apply: any amount the nominee encashes may be credited only to the bank account already linked to the investor's own account, and the Participant must not allow the nominee to change the investor's bank account, email address or mobile number under this mandate.

Mr Verma, 72, suffers a stroke that leaves his right hand unable to sign, though he remains fully able to understand and instruct. He holds a single-name demat account worth Rs 24,00,000.

He empowers his son as nominee to operate the account, specifying that the son may encash up to Rs 5,00,000 under the mandate at any time, a limit Mr Verma can revise whenever he chooses. His son submits the request along with a medical certificate confirming the nature and expected duration of his father's incapacity.

A responsible officer of the DP visits Mr Verma at home, confirms he understands and consents to the arrangement, and — because Mr Verma cannot sign with his right hand — takes his thumb impression in the presence of an independent witness, recording the circumstances on the request form. When the son later encashes Rs 3,00,000 worth of securities under the mandate, the proceeds go only into the bank account already linked to Mr Verma's own demat account — never to the son's own account, and the son cannot use this mandate to change Mr Verma's registered bank details, email or mobile number.

Chapter 6, section 6.2, under "Nominee to act on behalf of incapacitated investors", introduces this 2025-vintage SEBI provision immediately after the general nomination rules, as a distinct mechanism from ordinary transmission-on-death.

Expect a question distinguishing this mandate from a Power of Attorney (POA) or from transmission: the incapacitated investor is alive and retains ownership throughout, and the arrangement can be revised or revoked at will, unlike transmission, which is triggered only by death.

• The investor must still have capacity to contract — this mandate is not available for someone in a coma, on a ventilator or unconscious, however incapacitated they otherwise are.
• Only single-holding accounts qualify, and only one nominee, excluding a minor, may be empowered at a time.
• Proceeds can go only to the investor's own linked bank account — never to the nominee's account — and the nominee cannot change the investor's bank, email or mobile details under this mandate.
• This is not transmission. The investor is alive throughout and retains full ownership; the mandate can be changed without limit, unlike a one-time, death-triggered transmission event.